So you think it’s time to sell your business, but where do you start?
All too many times, the team at Elephants Child come across business owners who have very successfully run a business for decades, without ever really considering what to do when it comes to selling their business. So, what are the key steps in going about the process of exiting your business and where should you start?
We asked one of the Herd, Business Growth Advisor Andy Benson, for his thoughts on the subject.
Make a commitment to yourself and the process
“Making the first conscious steps towards planning for exit is one of the hardest steps for many. It’s alien to the normal activity of running an operation, and for many, it takes them away from their comfort zone”. So, committing to selling is the first, and for some one of the toughest steps in preparing for sale. “Having made the commitment, there are several actions you need to take to ensure you have the best possible chance of achieving your goal.”
Establish a baseline valuation
Elephants Child offers any business owner the ability to value their business as a complimentary service. This is largely based on the historical financials, current performance, and any business projections in place. Other key elements such as the uniqueness of the business, concentration and mix of clients, the extent of customer contracts which enable predictable revenues and profit levels, as well as the business sector, will influence the business valuation. “Establishing a base valuation is a great place to start” commented Andy. “Once that is broadly agreed, building a compelling and authentic story for what the business offers any potential acquirer is vital to ensure that once the business is offered for sale, it is clear in both words and numbers, why any acquirer should be interested in and motivated by the opportunity”.
Planning for succession
Beyond the business history, and its future strategy and growth plan, a critical element of any sale is the story as to how the business will successfully operate under new management, without the current owner at the helm. So, the future story in terms of organisation, processes and effective management needs to be clear to a potential investor. “The process of selling a business can be stressful to any business owner, however, preparing key elements such as succession well in advance should enable any business owner to enter the market with clarity and confidence” commented Andy. There are more details about this in our article on the importance of making yourself redundant.
In summary
“The story in numbers needs to be clear, so your accountant should be useful during the preparation process. Beyond the numbers, confidence in the story, current brand profile and future growth opportunity will increase the chances of achieving the appropriate reward for creating a good business”. Here at Elephants Child, we can be that guiding hand, as well as introducing other specialist trusted partners wherever needed to get the job done.